AirlineInvestor,

It is nice to see somebody so passionate and an ardent supporter of our airline sector.  I'm sure you have done well on AC over the past few years and playing with the house's money so to speak.  A couple of additional comments:

(1) during a recession and/or black swan event, risk scenarios typically change and risk can become asymmetrical.   What does this mean?  The variable in this case that will Either (a) build or (b) erode equity value of AC is TIME, and what point demand comes back to meet supply and stabilize fundamentals.  It was this variable that BUFFET was unsure of, and recognize that, with owning over 10%, he would have had conversation privileges with airline CEOs and was factored into his decision.  This isn't unique to US Airlines, but to all global airlines.   Hence why the R-squared of share price performance between global airlines hasn't been dissimilar.   THe asymettry of the risk profile relates to the probability that the equity value falls precipitously, until equity value is simply optionality, as we are increasingly seeing with AAL.    That brings with it the possibility of permanent value destruction.  

(2) Any business with levered fixed assets that require 24/7 utilization and has associated debt covenants is both (a) a great business to own in an upcycle as fundamentals improve, and the equity value shoots higher and debt structure strengthens, and (b) a terrible business to own in a downturn, and especially in a black swan event, where debt covenants are tripped, debt ratings fall, and equity value can plummet to near 0.  

Buffet underestimated the probability of such an event, as did most, but with the uncertainty around TIME to get the industry back into equilibrium,  saw a risk profile that suggested asymettry to the downside and, didn't want to incur the increasing chance of permanent impairment.  

Air Canada has billions in capital commitments over the next several years, and the unencumbered aircraft assets must be drastically marked down in a global environment with planes parked globally.   THis isn't trivial, nor can it be pushed aside by stating "Air Canada did so well for the past few years.".   The owners of the debt won't care.   IF they demand that AC raises equity to help meet covenants, all owners of the equity will be impacted thru dilution.   DEbt holders supersede Equity holders in the capital structure.   

Keep up the eager work and hopefully you and all longs have sized portfolio positions properly such that if the risk profile worsens, nobody's net worth is hurt too much.   And vice-versa, if Warren Buffet has it wrong and you have it right, you can put a feather in your cap.  

Good luck.